Uncovered Interest Parity in Crisis : The Interest Rate Defense in the 1990s

Author/Editor:

Andrew K. Rose ; Robert P Flood

Publication Date:

December 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper tests for uncovered interest parity (UIP) using daily data for 23 developing and developed countries through the crisis-strewn 1990s. We find that UIP works better on average in the 1990s than in previous eras in the sense that the slope coefficient from a regression of exchange rate changes on interest differentials yields a positive coefficient (which is sometimes insignificantly different from unity). UIP works systematically worse for fixed and flexible exchange rate countries than for crisis countries, but we find no significant differences between rich and poor countries.

Series:

Working Paper No. 01/207

Subject:

English

Publication Date:

December 1, 2001

ISBN/ISSN:

9781451874655/1018-5941

Stock No:

WPIEA2072001

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

15

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